Correlation Between Hyundai and Ilji Technology

Can any of the company-specific risk be diversified away by investing in both Hyundai and Ilji Technology at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hyundai and Ilji Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hyundai Motor and Ilji Technology Co, you can compare the effects of market volatilities on Hyundai and Ilji Technology and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hyundai with a short position of Ilji Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hyundai and Ilji Technology.

Diversification Opportunities for Hyundai and Ilji Technology

0.78

Correlation Coefficient

Hyundai  Ilji Technology

Poor diversification

The 3 months correlation between Hyundai and Ilji is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hyundai Motor and Ilji Technology Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ilji Technology and Hyundai is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hyundai Motor are associated (or correlated) with Ilji Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ilji Technology has no effect on the direction of Hyundai i.e., Hyundai and Ilji Technology go up and down completely randomly.

Pair Corralation between Hyundai and Ilji Technology

Assuming the 90 days trading horizon Hyundai Motor is expected to generate 1.11 times more return on investment than Ilji Technology. However, Hyundai is 1.11 times more volatile than Ilji Technology Co. It trades about -0.03 of its potential returns per unit of risk. Ilji Technology Co is currently generating about -0.11 per unit of risk. If you would invest  22,723,200  in Hyundai Motor on September 5, 2024 and sell it today you would lose (1,273,200) from holding Hyundai Motor or give up 5.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Hyundai Motor  vs.  Ilji Technology Co

Hyundai Motor

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hyundai Motor has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Hyundai is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Ilji Technology

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ilji Technology Co has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Hyundai and Ilji Technology

The main advantage of trading using opposite Hyundai and Ilji Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hyundai position performs unexpectedly, Ilji Technology can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Ilji Technology will offset losses from the drop in Ilji Technology's long position.

The idea behind Hyundai Motor and Ilji Technology Co pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.